Biosecurity Externalities and Indemnities for Infectious Animal Diseases

David A. Hennessy
July 2013  [13-WP 539]

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Suggested citation:

Hennessy, D.A. 2013. "Biosecurity Externalities and Indemnities for Infectious Animal Diseases." Working paper 13-WP 539. Center for Agricultural and Rural Development, Iowa State University.


In animal agriculture, biosecurity decisions are dispersed across many herd owners. Choices impacting disease spread will be determined by impacts on private economic values, and so are economic externalities. However, externalities are not all alike. By way of three very distinct examples, we demonstrate how they differ and what these differences mean for approaches to policies seeking to manage them. The three examples are an endemic disease pool that can be managed by limiting sources and flows, an exotic disease that can be managed by way of communicated coordination, and an infrastructural support externality that can be managed by disease outbreak insurance. We pay particular attention to how concentration in animal herd ownership affects incentives for disease control.

JEL Classifications: D2, H4, Q1

Keywords: business continuity, complements, infrastructure, substitutes.